Entrepreneurship

•The economic activity of a person who starts, manages and assumes the risk of a business
enterprise
Entrepreneur
 The person who undertakes entrepreneurial activities.
 He identifies an economic need, considers offering a business solution, proceeds to
assemble the resources required, and assumes the risk of whether succeeding or failing.
The Entrepreneur's Tasks
Surviving enterprises are responsible for providing the following:
 Products and services for customers and producers
 Employment
 Taxes
 Demand for suppliers' products and services; and
 Training facilities for future entrepreneurs

MAJOR ACTIVITIES OF THE ENTREPRENEUR

THE ENTREPRENEUR’S TASK

Functions to be performed by entrepreneur (to make profits)
 To supply the necessary capital
 To organize production by buying and combining inputs like materials and labor;
 To decide on the rate of output, in the light of his expectation about demand;
 To bear the risk inherent o the venture (undertaking).

Kinds of Innovation (5)

1) A new product;
2) A new process of production;
3) The substitution of a cheaper material in an unaltered product;
4) The reorganization of production, internal function, or distribution arrangement leading to
increased efficiency, better support for a given product, or lower costs;
5) An improvement in instruments or methods of doing innovation.

Innovation may also be viewed as the last stage in an important process consisting of the
following:
a) invention - the discovery or devising of new products and processes.
b) development - the process by which the ideas and principles generated from the stage of
invention are embodied in concrete products and techniques; and
c) innovation - the actual introduction of a new product or process.

Examples of Successful Innovations

 Cordless microphone;
 Microwave oven;
 The cellular phone;
 The kung fu fight scenes developed by Bruce Lee in the movies;
 The karaoke music appliance;
 The use of laser in the treatment of eye conditions; and The use of computers by engineers
and architects in the design of buildings.

New Ventures and Long-Term Enterprises

 A new venture cannot remain as such forever.
The entrepreneur must develop it into a small business or make it grow into a
mature and bigger company if he is to recoup the cost of opening a new venture and
take advantage of the opportunities presented by a mature business.

4 Major Stages of Transition of New Venture to a successful long-term Enterprise

1) The prestart-up stage
2) ) The start-up stage
3) 3) The early growth stage
4) 4) The late growth stage

M’s of Management
 Manpower
 Money
 Materials
 Market
 Machineries
 Methods
 Minutes
 Media
 4 factors of production
 Land
 Labor
 capital
 entrepreneurship

Pre-start up Stage
• Entrepreneur starts to question the feasibility of an idea, product, or service.
•He seeks answers to questions regarding potential markets, production, and financing.
 The most important stage that the entrepreneur must consider.
 If he errs (make a mistake) in his evaluation, he will fail before considerable growth is attained.

Activities in the Start-up Stage

1) Formation of the business;
2) Generation of necessary capital;
3) Purchase of facilities and equipment;
4) Constructing prototype products; and
5) Testing the market.

Start-up Stage
 No full-scale activity must be undertaken in the start-up stage for the simple reason that
feasibility must be established and verified.

Early Growth Stage

this stage follows after establishing feasibility
- Activities will be on a small scale, i.e. selling to limited markets with limited resources.
- If losses occur, it will naturally be limited also.
- If the enterprise is successful at this stage, the option to move to the next stage can be exercised.

The Late Growth Stage - e final stage before the new venture matures into a stable enterprise.
- This is when management is structured, long term financing is established, and facilities planning
are undertaken.
- This is also the stage where the skills of the entrepreneur are less needed. Instead, the skilled
manager begins to take over.

Rewards for Successful Entrepreneurship

 The use of the factors of production deserves to receive some form of compensation.
 The factors of production are called " things required for making a commodity" consist of
land, labor, capital.

Rewards for Successful Entrepreneurship (cont)

• CAPITAL-Interest is the compensation paid to owners of invested capital.
•LABOR - for the efforts of laborers, they are paid wages or salaries.
-Wages may be determined on a piece-rate basis, while salary is based on time-rate.

Rewards for Successful Entrepreneurship (cont)

 When all the factors of production are properly compensated, whatever is left as profits are
regarded as income and they accrue to the account of the entrepreneur.
  • The rates of compensation provided to the factors are limited to the large extent by either
industry norms or market forces. Legislations, however, have modified the rates like the
minimum wage rates and mandated interest rates on capital.

 The profits accruing to the entrepreneur, on the other hand, are limited only by his skill and
industry. He may reap huge amounts of profits, but he may also lose large amounts in the
exercise.
 Entrepreneur earns profit for deciding how the business shall be run.
 - If he succeeds, he is compensated for his vision, originally, any bold undertaking.

REWARDS FOR SUCCESSFUL ENTREPRENEURSHIP

The Entrepreneur's Predicament

• In the race of winning the all-important consumers' pesos, the business will have to offer products
or services that have certain advantages over the competition's wares (goods)
 In the creation of new venture, the entrepreneur may be successful in offering innovative
products or services. At this stage, he will reap the profits for being ahead of the competition.

Entrepreneurship and Business Size

 Entrepreneurship means running a small business.
 Business can be undertaken on a large scale.
 Both small and large scale businesses are confronted by problems that are entrepreneurial in
nature.

Examples of Innovation (innovative approaches to effectively compete)

 Offering business services during Sundays and holidays;
 Manufacture and sales of new products;
 Selling on a deferred payment scheme.

2. A feasibility report is filled with calculations, analysis and estimated projections of a business
opportunity. Business plan is made up of mostly tactics and strategies to be implemented in order to
start and grow the business.

3. A feasibility study is all about business idea viability while a business plan deals with business
growth plan and sustainability.
4. A feasibility study report reveals the profit potential of a business idea or opportunity to the
entrepreneur, while a business plan helps the entrepreneur raise the needed startup capital from
investors.

NATURE OF SMALL BUSINESS

What is Small Business?
 May be defined by using any of the two approaches:
o MARKET SHARE
o TOTAL ASSETS
What is Small Business?
• Market Share Approach
- A business which is independently owned and operated and which is not dominant in its
field of operation.
- "Independently owned" - ownership is by a private individual, a partnership, or a
orporation.
- "Not Dominant" indicates that a small business does not control a sizable share of its
market. .
o When the total sales of a business firm is less than one percent of the total demand
for its products, the firm may be considered small business.
 Total Assets Approach
 Having total assets that fall within a certain bracket.
• Magna Carta for Small Business Enterprise (RA 6977) indicates that the firm must
have total assets valued at above P1.5 Million to P15 Million to be considered Small
Business.
• The government prefers this approach because it simplifies formulation and
implementation of policy.
-Having total assets that fall within a certain bracket.
-Small Business => P1.5 Million to P15 Million
Microenterprises => Less than P1.5 Million

Small Business (Cont'd)

• Disadvantage of Total Assets Approach
 Asset values are affected by inflation;
 After so many years, inflation alters the nominal value of business assets and what
may be previously considered small business may no longer be classified as such.
The Market Share Approach is more appropriate (Business management view point)
 The target market share is an objective more basic than other objectives.

KINDS OF BUSINESS ACCORDING TO SIZE
5 Types of Small Business
 Manufacturing
 Service
 Wholesaling
 Retailing
 General construction firms

Small Manufacturing Business

• Involved in the conversion of raw materials into products needed by society.
• Examples: Bakeries, tricycle sidecar assembly shops, bagoong manufacturers, restaurants and
others.

Small Service Business

• Those that provide service in one way or another. Further classified into the following:
1) Business services - provide service to other business. (Ex. Accounting firms, janitorial service firms,
security service firms, collection agencies and the like)
2) Personal services - those that provide service to the person. (Ex. Tutoring services, massage
parlors
3) Repair services - provide repair services to owners of various machinery and appliances. (ex. Auto
repair shops, watch repair shops, plumbing services, etc.)
4) Entertainment and recreation - movie houses, resorts, billiard pool centers and the like.
5) Hotels and motels
6) Education Services - Montessori schools for children, high school, correspondence schools, among
others.

Wholesaling
• Activities of persons or establishments which sell to retailers and other merchants, and/or to
industrial, institutional, and commercial users, but who do not sell in large amount to final
consumers.
A big number of these wholesale businesses are owned by small business operators.
- Softdrinks wholesaler in local areas
- Dealers of supplies and office equipment
- Grains wholesalers

Retailing
• Covers all activities involved in the sale of goods and/ or services to the final consumers.
 The bulk of retailing activities are performed by small businesses.
 Examples: drugstores, fastfood shops, appliance stores, etc.

General Construction firms

• Engaged in the construction of buildings whether for private individuals or firms, or for
government.
• • Many of which perform subcontracting jobs for the bigger contractors such as installing
electrical facilities and sewerage.

Characteristics of Small Business

(1) Independent management - the owner is also the manager;
(2) Small Capital Requirement - small business requires only small capital and this can be supplied
by a single or a few individuals;
(3) Mostly local operation- small business usually operates in a certain locality although there are
cases when the market is not confined to a local area.
Advantages of Operating a Small Business
• Be an employee
• Be a professional
• Be a small business operator (SBO)

In Small Business Operation

• Opportunity to gain control over his own destiny;
• Opportunity to reach his full potential;
• Opportunity to reap unlimited profits; and
• Opportunity to make a contribution to society and receive recognition for his efforts.

Disadvantages of Operating a Small Business

• Uncertainty of income;
• Risk of losing your entire capital investment;
• Lower quality of life until the business gets established;
• Complete responsibility;
• Paperwork ad other chores; and
• Long hours and demanding work condition.

Economic Importance of small Business

• Providers of economic opportunities for entrepreneur.
• Providers of products and services to consumers;
• Suppliers of products and services to other businesses.
• Distributors of products and services of other businesses;
• Supporters of government;
• Providers of employment.

CHAPTER 3: THE ETHICAL AND SOCIAL RESPONSIBILITIES OF THE

ENTREPRENEUR
WHAT IS BUSINESS ETHICS
• Ethics - is the study of moral obligation involving the distinction between right and wrong.
• As a consequence, the study of ethics paved the way for the adaption of the general rules of
conduct in society.
The ethical behavior required of entrepreneurs is determined by the following:
1. the public;
2. Interest groups like the society of Prevention of Cruelty to Animals;
3. Business organizations; and
4. The individual's personal morals and values.

Factors Influencing Ethical Behavior

1. The situation;
2. Reward system;
3. Individual differences; and
4. Other factors.
 THE EFFECT OF ADHERANCE TO ETHICAL STANDARDS

• The expectation of high rewards for committing unethical behavior motivates a person to do
it.
• However, when he thinks that there is possibility that he would be censured, his motivation
is diminished.
• A person who is considering adulterating his products to increase his profits will be more
inclined to do it especially if the community does not condemn strongly such acts.
• People are different from one another and that includes differences in reacting to specific
situations.

How Ethical Behavior is Encouraged

Certain ways of encouraging ethical behavior among employees.
1. Adaption of a code of ethics;
2. Institution on rewards and punishments concerning ethical behavior;
3. Adaption of internal programs for resolving conflicts;
4. Creation of ethics review committees;
5. Provision of training in ethics for employees; and
6. Top management support.

• Code of Ethics - is a formal document indicating the entrepreneurship's adapted principles of

appropriate behavior.
• A code of ethics is very useful to the firm espousing ethical behavior.
o It serves as a basic reference for employees who make big or small decisions.

A code of ethics can be made effective if the following requirements are met:
1. It should refer to specific unethical practices like receiving gifts, avoiding warranty claims,
bid-rigging, making fictitious claims, among others; and
2. It must be supported by top management. support comes in various forms such as providing
sufficient funds for its implementation and assigning specific employees to handle ethical
infractions of other employees, and the like.

Ethical behavior of personnel occurs only when the entrepreneur develops a code of ethics and
successfully implement it
Rewards, Punishment, and Ethical Behavior
 A code of ethics is sufficient for some people if ethical behavior is required.
 If the entrepreneurship wants to have sore measure of control over the behavior of its
personnel, a system of Reward and Punishment must be instituted.

 Punishment could take the form of dismissal, demotion, suspension, or reprimand.

 Rewards may be given in the form of Cash gifts, promotion, or citation.

Ethical Issues Facing Entrepreneurships

1. Between the company and the customers;
2. Between the company and its personnel and employees;
3. Between the company and its business associates; and
4. Between the company and the investors and the financial community.

 Entrepreneurs are expected by society to treat their customers fairly and not to act in ways
that will harmful to them.
 Entrepreneurs should provide support for consumer rights which are as follows:
1. The right to be safe;
2. The right to be informed;
3. The right to choose;
4. and the right to be heard
 The right to be safe - consumers expect that the products and services that they buy will do
them no harm.
 The right to be informed - consumers make purchasing decisions often.
Advertisements and information printed on labels are some of the ways of providing
information to consumers about products and services.
 The right to choose - firms that intend to adhere to business ethics should strive to protect
consumer's to choose.
 The right to be heard - customers have the right to communicate their concerns to
entrepreneurships they patronize.

Good ethical conduct requires entrepreneurs to be aware of their responsibilities to employees.

these are the following:
1. Workplace safety;
2. Quality of life issues;
3. Avoiding discrimination; and
4. Preventing sexual harassment.

Preventing Sexual Harassment

Sexual Harassment refers to unwelcome sexual advances, request for sexual favors, and other
verbal or physical contact of a sexual nature.
1. Issue a specific policy statement prohibiting sexual harassment;
2. Develop a complaint procedure for employees to follow;
3. Create a work environment that encourages sexually harassed employees report their
experiences;
4. Establish a committee to investigate sexual harassment claims; and
5. Take disciplinary actions against harassers.
There are two complementary factors that determine success or failure in an entrepreneurship.
These factors are:
1. The Environment, and
2. The Personality of the Entrepreneur.

The Economic Environments may be classified as follows:

1. Those fully supportive of entrepreneurships;
2. Those moderately supportive of entrepreneurship; and
3. Those not supportive of entrepreneurships.

THE ECONOMIC ENVIRONMENT AND THE ENTREPRENEUR

The Entrepreneur's Personality
 Every person has a personality that is unique and different from others. Each personality
type has a corresponding type of job that fits it.
 A certain personality, however, may fit in more than one type of job, although the level of
fitness will be different with each job.

PERSONALITIES AND JOB FIT

What is Personality?
 Personality
refers to the pattern of
characteristics
that distinguishes
one person from
another.
 It includes person's traits,
values, motives, genetic
blueprints,
visible behavior patterns.
attitudes, emotional reactivity, abilities, self-image, intelligence, and visible behavior patterns.

Six personality types (by John L. Holland):

1. The realistic type;
2. The investigative type;
3. The artistic type;
4. The social type;
5. The enterprising type; and
6. The conventional type.
Drive
 Success in becomes entrepreneurship possible when the entrepreneur is self-motivated
enough to pursue his chosen course without relenting even in the face of adversity.

Human relation ability

 Three types of persons will
determine the survival and
growth of business firms.
1) The customer
✓ The customer
makes the decision whether to
patronize the firm or not
2) The employee
✓ The employee can
be productive and loyal to the firm.
3) The third party with interest
in the firm.
✓ Third party with
various interest regarding
the firm can also be made to be
more cooperative and accomodating.

Ability to communicate
  Communication skill is a very important characteristics of an entrepreneur must have if
success is expected.
 When the entrepreneur gives orders that are easily understood, wastages in time and
materials are minimized.

Technical knowledge
 Operating entrepreneurs requires the performance of major and minor tasks.
 It will be easier for him to devise a strategy on how he will manage his firm to effectively
compete with others.

Reasonable risk taker

 When a person starts a new venture, he has already begun to assumes the risk of business
failure.
 Entrepreneurs are expected to be reasonable risk takers, not conservative but also not
gamblers.

THE ENTREPRENEUR COMPARED WITH OTHER RISK TAKERS

Self-confident
 "A person cannot
achieve much unless
he has sufficient
confidence in himself.
 Self- confidence is
best exemplified by
successful entrepreneurs
who have physical
disabilities.

Goal Setter
 Goals are very useful motivational tools, especially those related to accomplishing the
objectives of entrepreneurs.
A goal performs the
following functions:
1. It direct one's attention to a
specific target;
2. It encourages one to exert effort
toward achieving something
specific;
3. It encourages persistence; and
4. It fosters the creation of
strategies and actions plans

-Innovation may be the only way the entrepreneur can achieve the following:
1. Penetrate the market;
2. Improve employee turnover;
3. Reduce manufacturing cost; and
4. Improve collection rate.

What Motivates People to Become Entrepreneurs

1. The desire to be one's own boss;
2. The desire for financial rewards;
3. The desire to create one's own job security; and
4. The desire to improve one's quality of life.
 ▸ The last two stages
require the skills of the
manager.
 ▸A major distinction
between the
entrepreneur and
the manager is about
orientation.
  ▸ The entrepreneur (also called Promoter) feels confident of his ability to seize a business
opportunity regardless of the resources under his current control.
 ▸ The manager (also alternatively called the Trustee) emphasizes the efficient utilization of
resources.

Note: at the start-up stage, the only activity of the entrepreneur is identifying a good
business idea. When he decides on a business idea, he starts operating with limited human resource
and capital.

3. Actual polls of population samples representing typical customers. The means used include the
following:
a. Mail questionnaires;
b. Advertisements incorporating feedback mechanisms such as mail responses;
c. Phone interviews; and
d. Personal interviews.

▸ Technical Feasibility
 Business ideas oftentimes appear easy to execute, but it is not really so when converting
them into real products or services with the required quality and quantity.
 Production difficulties could take the form of unstable supply of materials, unreliable or
fluctuating power supply, and others.
 One of the factors necessary in determining whether a business idea should be
considered or not is financing.
 This means that there must be sufficient funds to finance operations.
 the proposed owners of the venture must have sufficient capital or if insufficient, must
be of good credit standing in the community.
 The sourcing of financing include the following:
1. The proposed owner's saving;
2. Relatives and friends; and
3. Financing institutions like banks.

Financial Feasibility
 The purpose of entrepreneurship is to provide a source of income to the
entrepreneur.
 Any business idea that cannot provide some indication of profitability must be
screened out.
 Profit is a result of the financial feasibility of the business idea.

•Two steps of Financial Feasibility

1. The preparation of projected financials statements, such as
a. Income statement
b. Balance sheet
C. Cash flow statement.
2. The determination and analysis of financial ratios derived from the projected statements.
Projected Financial Statements
1. It means the forecast of something which will happen in the future.
 a. Projected income statement is a financial record summarizing a firm's planned or
expected financial performance in terms of revenues, expenses, and profits over a given
time period.
2. The projected balance sheet shows the planned or expected financial position of the
enterprise on a particular date.
3. The projected cash flow statement is one which shows the planned or expected cash sale
and/or purchases.

Final Selection
▸ The purpose of screening is to eliminate from the list the generated business ideas that did not
pass the adapted criteria. After screening, the list may appear to be any of the following:
a. Status quo;
b. A shorter list;
c. Zero listing.

 Status quo listing means all business ideas listed passed the adapted criteria.
 A short list means some of the ideas generated were eliminated.
 Zero listing means all business ideas generated and listed were eliminated.
 Final selection is applied to the status quo, or the shorter list, whichever is produced by the
screening stage.

Organizational Culture and Creativity (Characterized by the following:)

1. Encouragement of creativity and risk- taking;
2. Rewards for creativity
3. Open communication;
4. Allowance for errors
5. A climate of participation;
6. Structural mechanisms that aid creativity;
7. Training in the creative process; and
8. flexibility

• Creativity refers to activities involved in finding solutions to problems that hinder the
achievement of the firm's objectives.
 It is the proactive way of solving problems.
 The organizational that is characterized by risk taking is not discouraged by poor result in
testing ideas.
 Rewards for Creativity
 -When an activity is rewarded, there is an assurance that such activity will continue
existence. Creativity is no exception.
 Open communication
-The free allowing exchange of ideas between the members of an organization.
 Communication flows through the vertical and horizontal relationships in the organization's
structure.
 An important advantage of open communication is that problems are easily directed with
the ability to offer solutions.
 Allowance for errors
-Innovation thrives in an environment that provides allowance for errors.
-It is not right to expect any activity to be devoid of imperfections.
-"When an error is detected, a move should be made to correct it.
 A Climate of Participation
When somebody feels that the organization espouses participation, that person will
not hesitate to make a contribution to the creative efforts of the organization.
 Structural Mechanisms That Aid Creativity
- The urge to create solutions to problems would be deeded by the innovative person
more easily if there are structural mechanisms within the organization to support the
exercise.
Training in the Creative Process
- "Creative pursuits are a bit complicated and it will help if those expected to perform
such functions are properly trained.
▸ Flexibility
-One of the distinct characteristics of the creative organization is flexibility.

CHAPTER 5
THE SEARCH FOR A SOUND BUSINESS
What is sound business idea?
 Defined as the economic opportunity which is within the reach of the entrepreneur and
which will provide him with a desirable value.
 An entrepreneur who is well grounded in the concept of sound business idea will be
able to save time, effort, and money in pursuing his goals.

The Product or Service Offering may be Improved in terms of:

1. Performance, like the chair chat can carry more weight;
2. Maintenance cost, like the car battery that requires less servicing than competing brands;
3. Acquisition cost, like the latest low priced model of a certain brand of cell phone compared to
competition;
4. Salvage value, like the steel filing cabinet that has a higher salvage value; and
5. Uses, like the flypaper that can also be used as mousetrap.
- Improvement of service to customers may mean faster delivery or prompt after sales
service when required.
 THE IMPORTANCE OF SOUND BUSINESS IDEAS

Business Ideas Differ in Form.

Examples of these forms are the following.
1. An old type of business can be professionalized. Operations can be stream lined and
better organized.
2. A standard product can customized.
3. New technology can be adapted to manufacture and old product.
4. Imported products can be replaced by local products. Importing products can be too
cumbersome and difficult.
5. Business operations can be internationalized. This is real challenge to the
entrepreneur. The rewards are great, however, when he is successful.

Procedure in Determining the Best Business Idea

▸ The steps in the proposed procedure are as follows:
1. Preparation of the listed ideas;
2. Screening of the listed ideas; and
3. Final selection.

Methods for Searching for Ideas

▸ There are two general methods of generating business ideas. They are as follows:
1. Unanticipated means and
2. Deliberate search.
The Person's Work
 Employees who are in direct contact with customers are sometimes confronted with
demand for products or services that are not currently provided by the company.
 To the enterprising employee, this may be interpreted as an opportunity for
entrepreneurship.

The Person's Hobbies

 A hobby is a useful means of developing some skill which could be useful later when the
hobbyist deciues to operate a business. There are times when a person's hobby turns out to
be a business opportunity.

▸ Acquaintances
• There are times when a persons fails to notice the existence of a business opportunity.
Sometimes, it takes another person to make him aware of the wisdom of starting a new
business venture.
• This person could be a friend, a neighbor, or just anybody he meets once in a while.

A Chance Event
• There are times when a persons encounters an event that will provide him with a clue to a
business venture.

Deliberate Means
 A disadvantages of unanticipated means in idea generations is the difficulty of ascertaining
the exact date when the ideas will come pouring in. To offset this problem, a deliberate
search for ideas is made. this type of idea generation takes the form of the following:
1. Using search questions
2. Idea prompting

Using Search Questions

 Business ideas are expected to provide answers to some needs. Answers can be obtained if
the right questions are asked.
 Examples of search questions are:
1. How can this product be made differently?
2. What will motivate the consumers to buy my product instead of the competitor's
product.
▸ Idea Prompting
• Encounters with someone else's idea, or a customer request, or some other event may
provide hints or cues leading to business ideas.
 Customer request could also be analyzed to give way to idea prompting.

Screening Generated Ideas

 The search for a sound business idea calls for the preparation of a list so the best can
be selected.
 Business ideas may be screened with the use of the following criteria:
1. Market Feasibility
2. Technical Feasibility
3. Financing Feasibility
4. Financial Feasibility
▸ Market Feasibility
• A business idea must pass the test of market feasibility. This means that there must be some
positive indication about the following:
1. Stable and sufficient demand; and
2. Potential competitive strength of the firm.

1.Stable and Sufficient Demand

 A business idea will not last if there is insufficient demand for whatever product or
service that is contemplated.
 Demand that remains constant or shows signs of growth throughout long periods
indicates the probability of market feasibility.
2.Competitive Strength
 The business idea must be such that the venture can effectively compete with current or
potential competitors.
 The competitive strength of the competitors must be determined in terms of Product
offerings, Price, Distribution methods, Promotion methods, and others.

THE WAY TO SOUND BUSINESS IDEAS

Sources of Market Information
Information required to determine the market fit of the business idea may derived from the
following:
1. Prior studies of the market or related markets by other companies, government agencies,
and entrepreneurs.
2. Negotiations with prospective customers to solicit orders and determine whether or not
they will actually buy.

What is Strategic Planning?

Refers to the process of determining the primary objective of the entrepreneurship and the
adopting courses of action and allocating resources to achieve those objectives.

It involves 3 distinct steps of definition:

1. Determination of primary objective
2. Adoption of course of action
3. Allocation of resources

It provides the entrepreneur with systematic approach to the achievement of the firm's objective.

Systematic approach-The approach that is methodical, repeatable and able to be learned by a step-
by-step

Determination of pary objective

The objective of the firm are important component to the firm's strategic planning activities
but before these are determined, the firm's mission statement must be developed.

Mission Statement Refers to the basic description of the fundamental nature, rationale
and direction of the firm.

It consist 3 concern;
1. How the entrepreneur intends to use his resources;
2. How the entrepreneur expects to relate the ever- changing environment; and
3. The kind of values the entrepreneur intends to offer his customer

Strategic Objectives
Refers to the specific performance targets that the entrepreneurship hopes to accomplish. The
objectives define, in specific terms, how the firm's mission will be realize.

Example of strategic objectives are the following:

1. Expand production capacity by 50% with in two years
2. Increase sales by 50% by the year 2012
3. Increase market share by 10% every two years
4. Increase the number of outlet by three within three years.

Adoption of Course of Action

After the primary objective are established, the entrepreneur must develop strategy which is
alternately called course of action.

A strategy is a carefully designed plan for achieving the firm's objectives.

It indicates how the entrepreneur will attempt to accomplish the goals with the resources available.
Ex.
1. Establish branches in strategic location
2. Design a system that will attract persons with high potential to work with the company
3. Engage in the recruitment of retailers from nearby provinces
4. Engage in building up the company's image as a reliable supplier of quality poultry products.

In developing realistic stres, the entrepreneur can make use of the most popular tools.

These are the following:

1. SWOT analysis
2. Forecast of future sales performance

SWOT Analysis
Is an organize method of assessing a firm's strengths and weaknesses and the opportunities and the
threats in the external environment that comfort or will comfort the firm.

The purpose of SWOT Asis is match the firm's strength and weaknesses with external opportunities
and threats to determine what strategy to adopt.

The firm's Strength

Refers to the skill, competence, a valuable organizational resource or competitive capability,
or an achievement that gives the firm a market advantage.
The firm's Weakness
Refers to something a company lacks or does poorly or a condition that puts it at a
disadvantage. It must be noted, however, that depending on the competitive situation, a weakness
may or may not make a company vulnerable to competition.

The firm's Opportunity

Refers to the chance offered by the external environment to improve the firms situation
significantly.

The firm's Threats

Refers to the challenge posed by an unfavorable trend or development in the external
environment that would lead to, in the absence of purposeful entrepreneurial action, the erosion of
the entrepreneurship position.

Forecast of future sales performance

A supplementary tools for SWOT analysis. It is an estimate or prediction of the future sales
or income of the firm. forecast may be:

Short term-1 year or less

Medium term-1 to 5 years
Long term-over 5 years

Implementing Strategic Plans

Strategies are useless unless they are implemented.

Following activities are required to put strategies into action;

1. Identifying the specific methods to be use
2. Deploying the resources needed to implement the intended plans
Identifying Specific Methods
Strategies determine the best way to use resources. There is need to develop tactics which
will be used to implement the strategies.
Tactics are more detailed and they are used to determine how specific task can best be
accomplished on time with available resources.

If established branches inrategic location "is a stated strategy, the tactical plan is implement it may
appear as follow:
1. Identify strategic location
2. Determine the potential of the identified strategic location.
3. Set a time table for installing the branches

Deploying the resources

The specific aim of planning is to able to deploy the right quality and quantity of resources in
the various activities required to achieve the objective. The resources would be indicated in terms of
human and nonhuman elements.

Fundamental Strategies for Small Business

There are certain basic strategies that are necessary for the survival of small business. These
are the following:
1. the flexibility strategy
2. the strategy of effectiveness as priority
3. the strategy of starting simple

The Flexibility Strategy

It is very difficult for small business to effect changes in its environment because its
resources are usually limited. However if the small business required a certain degree of
flexibility they can pursue the business objective.

For instance, Then the appliance dealer does not have the facility to deliver the goods directly to the
customers, the entrepreneur can hire the service of small transport operator.

Another option could be the granting of a discount to offset the delivery expense that will be
shouldered by the customer. This required a degree of flexibility.

The Strategy of Effectiveness as Priority

Effectiveness is sometimes sacrificed for the sake of efficiency. Although efficiency is a
desirable goal, it is oftentimes disastrous for small business to neglect effectiveness.

The firm that concentrates on efficiency may be able to reduce its expenses but it may not be able to
generate sufficient income to keep it afloat.

At the early stages in the life of the small firm, when the venture is still trying to gain a foothold in
the market, turning at the first product and choosing the first sake are of a more basic concern than
making a profit.

As concerns for organization and structure are aimed at increasing efficiency, such activities must in
the beginning give way to effectiveness.
Start Simple
In starting a new business venture, the entrepreneur often encounters problems related to
financing. The temptation is great for the entrepreneur to finance all the activities required in
operating the venture. However, funds are not always sufficient.
It may be wise for the entrepreneur to let his subordinates perform the simpler task and
subcontract those that will need more elaborate employee skill and or special equipment.
The general; idea is for the small business venture to start simple and absorb slowly the
more complicated task as it grows.

Strategy concern of small business

1. is he organizing a new business, or
2. Is he currently running an old business

New Business
refers to one that will be operated for the first time by the small business operator. If so, his option
will consist of the following:

1. acquiring an existing business

2. organizing a new business
3. buying a franchise

Strategies for a Going Concern

The strategic problems of small business are not as intense as those of large business. Even if
all business cannot compete head-on with big business, its size has a built-in maneuverability which
is a very important competitive weapon.

Any or all of the following strategies are applicable to small business;

1. Segment markets-
The business operator will have to identify the market segment with which it has an
expertise, then compete.
2. Efficient use of research and development-
Since the small business cannot fight the research and development efforts of big
companies; it must concentrate its Rand D efforts to lowering process cost or to bring new
products to the market.
 3. Think small-
The small business can still be strong with being small emphasis must be on the
profits rather than sales growth, and specialization rather than diversification.

Why small business operators ignore strategic planning

1. Lack of expertise- few small business operators are trained in strategic planning.

2. Inability to get started-even small business operators are convinced about the importance
of planning, they fail to get started for lack of sufficient exposure to planning activities.

3. Uncontrollable, often intangible variables-the uncontrollable and often intangible variables

complicate planning which later on discourage the small business operating the exercise.

4. Resources poverty-planning requires time, but the small business operator oftentimes does
not have it. This is so because he must attend to the problems related to lack of adequate
capital, managerial experience, outside advice, management specialist and other key assets.

5. Focus on daily operations- the daily requirements of small business usually keep the small
business operator so busy that he is left with no time for planning.

6. Failure to realize the importance of strategic planning-the small business operator is

exposed to the environment of successful Filipino businessmen who do not engage in
strategic planning. This gives sufficient reason to disregard the benefits planning. It is ironic
that even if studies show regard the benefits of strategic planning, this activity is not fully
appreciated. The usefulness of strategic planning this activity is not fully appreciated.